How can carmakers reorganise their businesses?

18 January 2019

Jaguar Land Rover (JLR) and Ford Europe started the year by announcing mass job cuts and financial reorganisation. With others issuing profit warnings, and various challenges, both past and present, it is likely that further carmakers will need to look at their spending over the next twelve months, even if not to the extents recently announced.

Therefore, Autovista Group asked readers of our website and Daily News Brief what they felt was the best way to restructure for financial improvement. The results are in, with perhaps some unsurprising results.

The options of widespread job cuts and plant closures gained no votes in our latest poll, with these options the last resort for any manufacturer, and a path that no one would really think is the best choice unless absolutely needed.

However, the clear winner was the possibility of model streamlining, which gained 66%. This is a move which Ford is looking to make, getting rid of unprofitable models and concentrating instead on growing market segments. Many vehicle manufacturers have a vast range of models, many of which were born from special editions that have stuck around. The Ford C-Max and S-Max, both larger versions of the Focus, are two examples that are rumoured to be dropped. In addition, streamlining the options within a range is a possibility, reducing engine types and packages to leave a basic vehicle that is more profitable is another direction carmakers can take.

With 19% the next most popular answer was for manufacturers to pull investment from research and development. This is the opposite of what JLR is doing, the British company opening a new battery facility to ensure its future electric vehicle benefit from in-house technology. However, with the industry facing some challenges, with CO2 targets pushing electric vehicle (EV) development, while the race to be first to market with fully autonomous vehicles has created a fear of being left behind. Millions are being pumped into research, however slowing this down would benefit carmakers in the short term, while possibly hitting long-term prospects.

The next option, merging offices into one location, gained 12% of votes. Another tactic deployed by Ford, closing its UK head office in Brentwood and locating teams at its Dagenham engine plant and Dunton research facility, such a move will bring smaller financial gains but would remove overheads and make use of more existing infrastructure.

Just 3% of respondents chose the ′other’ option, with comments including continuing with current strategies to power through difficulty, looking for external investment or partnerships to share the burden of high development costs (a move Ford and VW have recently made), and the need to focus on margin rather than volume.